The Week Ahead – Flattening the Curve

Welcome to “The Week Ahead” where we take a moment to provide our thoughts on what we can expect in markets and the economy during the upcoming week.

For those who joined our Wealth Management Insights call this past week, you’ll recall that my colleague Rick Keller and I both made comments on the speed of which both monetary and fiscal policy was enacted relative to the Great Financial Recession in 2008. The Fed especially went out of its way to ensure that the internal plumbing of financial markets would remain healthy. Along with cutting interest rates to zero, instituting unlimited quantitative easing, and  various policies to allow banks to access capital easier, the Fed created multiple special purpose vehicles to help backstop commercial paper, money markets, and for the first time ever, investment grade corporate bonds. On Friday, President Trump signed the CARES act, a $2 trillion coronavirus economic stimulus bill targeting both Wall Street and Main Street. While there are numerous details within the bill and the exact timing of payments will need to be sorted out, the key takeaway is that households, small businesses, large companies, and state and local governments will have access to capital to help them sustain over the next few months.

The week ahead will be heavy with economic data, albeit data that is now already outdated. In normal times, Friday’s employment report would have been the data point that investors would have been closely monitoring but, given its lagging nature, it is now more of a footnote. Investors will be more keenly watching the weekly initial jobless claims report given last week’s historic count of 3.3 million first time unemployment filers. As the weeks go by, expect economic data points to reflect a weakening economy. Peak COVID-19 cases and the hope for a quicker economic recovery will only come if the public health response is aggressive to help flatten the curve. Social distancing works. Sheltering at home works. We now know that parts of the economy will be hibernating until at least April 30. The combination of monetary and fiscal policy should provide a temporary stopgap until COVID-19 is defeated. The Fed and the government have done their part and now it’s up to us to help do our part – let’s flatten the curve.

Data deck for March 28–April 3